Repaying Your Student Loans – Learn Your Options

August 7, 2018

The joy of becoming a graduate soon fades away with the enormous financial responsibility that comes with it! Repaying your student loans! This is not something you should put off. Timely repayment of your student loans has a major impact on your credit. Therefore, having a plan in place on how to repay your student loans is a financial priority.

Repaying Your Student Loans:

Make sure you understand all of your student loan repayment options and the various programs offered to federal student loan borrowers, including consolidation.

Standard Repayment Plan:

Subsidized and unsubsidized Direct and Stafford loans are eligible under this plan, as well as all PLUS loans. Payments are fixed, with at least $50 per month, up to 10 years. Under the Standard Repayment Plan, less interest is paid over time.

Graduated Repayment Plan:

Subsidized and unsubsidized Direct and Stafford loans are eligible under this plan, as well as all PLUS loans. Payments are not fixed and start at a lower number at first. Then, every two years, the payment increases. Over time, you will eventually pay more for the loan than under the 10-year standard plan. However, if you are starting off in an entry-level job with a lower income, but expect your income to increase steadily, this might be the right choice.

Extended Repayment Plan:

Subsidized and unsubsidized Direct and Stafford loans are eligible under this plan, as well as all PLUS loans. Payments can be either fixed or graduated, and borrowers have up to 25 years to complete payment. Monthly payments are lower than on the 10-year standard plan, but you will pay more over time in interest. For Direct Loans and FFEL, you must have more than $30,000 in outstanding loans under each category.

Income Based Repayment Loan:

Subsidized and unsubsidized Direct and Stafford loans are eligible under this plan, as well as all PLUS loans and consolidation loans that do not include Direct or FFEL PLUS loans made to parents. This type of loan is based on your discretionary income, and maximum monthly payments must be 15 percent of the difference between your adjusted gross income and 150 percent of the poverty guidelines. As your income changes, the payments change. The borrower has up to 25 years to pay this off and must prove partial financial hardship. Monthly payments will be lower than under 10-year standard plans, but you’ll pay more for the loan over time. After 25 years of qualified monthly payments (payments that meet the requirements of your loan repayment), the loan will be forgiven on any outstanding balance. However, you may have to pay income tax on any forgiven amount.

Income-contingent Repayment Plan:

Direct subsidized, unsubsidized, PLUS made to students, and consolidation loans are eligible under this plan. The payments, calculated on an annual basis, are based on your individual situation, including gross income, family size, and the total amount of loans. After 25 years of qualified monthly payments (payments that meet the requirements of your loan repayment), the loan will be forgiven on any outstanding balance. However, you may have to pay income tax on any forgiven amount.

Income-sensitive Repayment Plan:

Subsidized and unsubsidized Stafford loans are eligible under this plan, as well as FFEL PLUS and FFEL consolidation loans. The repayment schedule over 10 years is based on your annual income, and the payments change as your income changes. Every lender has a different formula to determine the monthly payment amount, and you will end up paying more for the loan over time than under the 10-year standard plan.

What if Repaying Your Student Loans is Hard to do?

If you are unable to meet the terms of your repayment, you may want to consider other options, such as deferment or forbearance. Depending on your line of work or situation, you may be eligible for student loan forgiveness as well. See video below to learn more about these options.

Share This Post!

Dilini is a Marking Communications & Programs Associate at ACCC. To anyone, managing finances can be a real challenge! Any tips and tricks to help get through this is great! Dilini will share her experiences, tips and tricks along the way through the Talking Cents blog. Stay tuned!

About Blog

Talking Cents was created by the staff of the nonprofit organization, American Consumer Credit Counseling (ACCC). Not satisfied with providing credit counseling, debt management, and financial education alone, these renegade employees took to the blogosphere in the hopes of helping not only their current clients, but the rest of the world at large to tackle more of the topics affecting people’s everyday financial lives.